What happens to my current student loan repayment plan?
If you're in an income-driven repayment plan like ICR, PAYE, or SAVE, you'll need to transition to a modified version of Income-Based Repayment (IBR) between July 2026 and June 2028.
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Money / Personal Finance
Student Loan Repayment Overhaul: What Borrowers Need to Know
The Senate has released its final version of the One Big Beautiful Bill, introducing a significant overhaul of student loan repayment plans. These changes will affect both current and future borrowers, with new repayment options and loan li...
Key Insights
- New borrowers after July 1, 2026, will have only two repayment options: a Standard Plan and the Repayment Assistance Plan (RAP).
- Parent PLUS loans will face new borrowing limits of $20,000 per year, per student, and $65,000 overall.
- Existing income-driven repayment plans (ICR, PAYE, and SAVE) will be eliminated between July 2026 and July 2028, requiring borrowers to migrate to a modified Income-Based Repayment (IBR) plan.
- The RAP plan bases student loan payments on adjusted gross income, starting as low as $10 per month, with a maximum of 10% of AGI for those making over $100,000 per year. Unpaid interest does not accrue, and balances are forgiven after 360 qualifying payments (30 years).
In-Depth Analysis
The Senate bill brings substantial changes to student loan repayment, impacting loan limits, repayment options, and eligibility criteria. For new borrowers taking out loans after July 1, 2026, the landscape will look very different. Grad PLUS Loans are eliminated, replaced by stricter annual and lifetime limits. The introduction of the Repayment Assistance Plan (RAP) offers income-based repayment options, with monthly payments potentially as low as $10. For existing borrowers, the sunsetting of popular income-driven repayment plans like SAVE, PAYE and ICR means a shift to a modified IBR plan. Parent PLUS loan borrowers are particularly affected, with limited access to affordable repayment plans unless they take specific actions before the deadlines.
**How to Prepare:** 1. **New Borrowers:** Understand the new loan limits and repayment options available to you. 2. **Existing Borrowers:** Monitor communications from your loan servicer regarding the transition to the modified IBR plan. 3. **Parent PLUS Loan Borrowers:** Explore consolidation options before June 30, 2026, to maintain access to income-driven repayment plans.
**Who This Affects Most:** - Future graduate students who relied on Grad PLUS Loans. - Existing borrowers currently enrolled in SAVE, PAYE, and ICR plans. - Parent PLUS loan borrowers seeking affordable repayment options.
FAQ
How does the Repayment Assistance Plan (RAP) work?
RAP bases your monthly payment on your adjusted gross income (AGI), starting as low as $10, and caps it at 10% of your AGI if you make over $100,000 per year. Unpaid interest does not accrue, and the balance is forgiven after 360 qualifying payments (30 years).
Are Parent PLUS loans eligible for the new income-driven repayment plans?
New Parent PLUS Loans made after July 1, 2026 will only be available to be repaid under the new Standard Plan. Existing Parent PLUS Loan borrowers have some pathways to continue to have access to income-driven repayment.
Takeaways
- New student loan borrowers will face stricter borrowing limits and have access to only two repayment plans: Standard and RAP.
- Existing borrowers in ICR, PAYE, and SAVE plans must prepare to transition to a modified IBR plan between 2026 and 2028.
- Parent PLUS loan borrowers have limited access to affordable repayment plans and should explore consolidation options before June 30, 2026.
- Economic hardship and unemployment deferments will be eliminated, with a discretionary forbearance capped at nine months for every 24-month period.
Discussion
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Disclaimer
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